Barry Littler

SQM has completed its inaugural rating of the Australian Eagle Trust Long-Short Fund, awarding its superior rating category of 4.25 stars.

The rating indicates that SQM believes the Australian Eagle Fund has substantial potential to out-perform over the medium to long term and that management is of a very high calibre.
SQM also stated that it considers the fund to be suitable for inclusion on most Approved Product Lists (APLs).

Barry Littler, CEO of Australian Eagle Asset Management, said the inaugural rating was very pleasing and that he believed there is a growing market appreciation for long-short strategies that are backed by a solid investment process.

The report noted that the Australian Eagle investment philosophy for long-only investing has been in practice since 2005 when the manager commenced managing institutional mandates and has performed well above benchmark.

Barry Littler also noted that “the long-short product represents a sensible evolution of our long-term process which gives clients access to both outperformance from long stock positions as well as value add from short positions. It is good to see that SQM agreed that the fund displays defensive characteristics and should be a good portfolio diversifier”.

Performance:

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Barry Littler

Alleron Investment Management has relaunched as Australian Eagle Asset Management to differentiate from its wholesale and institutional past.

“As Alleron, we worked exclusively in the institutional space but now feel that we have the track record and team to also offer ourselves to the retail sector.

“The name Australian Eagle captures something essential about our approach and philosophy of taking a panoramic view before swooping on an opportunity. We wanted the name change to also herald the completion of the ownership transfer to staff.

“Strong retail interest is expected to concentrate on its Australian Eagle Long Short Fund which can now accept smaller contributions and will appeal to SMSF and advised clients.

“More advisers wanted access to our proven track record for their SMSF clients and individual investors who want diversification from traditional Australian equities.

“We think this will translate into 50-70% of inflows coming from retail investors over the next year or so,” said Barry Littler, CEO, Australian Eagle Asset Management.

Fund performing at approximately 20% per annum for the last three years

“Performance of 20% per annum or 8.2% above benchmark over the nearly three years of the Fund’s life is a pleasing result and highlights that our successful process and team can implement both Long Only and Long/Short strategies from the same research set,” said Sean Sequeira, CIO, Australian Eagle Asset Management.

Australian Eagle Long Short Fund

The Fund typically maintains a 150% long securities exposure funded by short selling 50% of the securities.

Australian Eagle seeks to buy superior quality stocks with a sensible risk buffer and hold those investments so that the longer-term advantages of those companies manifest in a superior rate of return. The Australian Eagle investment process is designed to identify those stocks that have the most characteristics of a superior company, whilst also offering a valuation edge.

On the short side, Australian Eagle seeks to sell companies that do not display these characteristics or rank poorly on such characteristics compared to the superior companies and exhibit poorer technical characteristics.

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Barry Littler

A 150/50 structure can be an efficient solution for extracting the best risk/return from an approach that tends to be long high-quality stocks and short low-quality stocks.

For equities fund manager, Alleron, a 150% geared long portfolio funded by a 50% short sold portfolio, “150/50”, provides a sensible compromise between maximising returns and minimising portfolio risk and, we believe, will deliver a better risk return outcome for investors than a long only portfolio or a market neutral portfolio.

“Market neutral paradoxically can be more exposed to drawdown risk than a 150/50 structure when low quality stocks run hard,” said Barry Littler, CEO, Alleron Investment Management.

Alleron’s investment process identifies stocks with superior quality characteristics, sensible valuation upside and the potential for transformative change backed up by tangible evidence of that change – a “trigger” event in Alleron’s lexicon.

The Australian Eagle Trust Long-Short Fund marries Alleron’s long-only portfolio with a portfolio of shorts of generally poorer quality, overvalued equities. Based on simulations back to 2005, the shorts exhibit a negative alpha correlation to the Alleron long portfolio which assists in improving the risk/return characteristics of the long-short portfolio in falling markets.

For wholesale clients only. Not to be relied on by any other person or seen as advice.

by Barry Littler, Chairman/CEO

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“We are delighted that David can join Alleron in an official role and we value his research knowledge in capital markets. Risk management is a specialised area and to have access to his expertise is a great addition to our team. David is well known in the industry and has lectured and mentored many market professionals over the years,” said Barry Littler, CEO, Alleron Investment Management.

Prior to joining Alleron, Dr Gallagher was the CEO of the Centre of Excellence in International Finance and Regulation (CIFR). Aside from many professorial appointments, he has been a research director with the Capital Markets CRC Limited since 2008.

Dr Gallagher graduated from The University of Sydney Business School with a PhD in Finance in 2002.

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